QDII expands but insurance quota is "a drop in the bucket," the channel for insurance capital to go global urgently needs to be widened.

Insurance funds’ overseas investment has received a certain amount of “clearance.” Recently, data disclosed by the State Administration of Foreign Exchange showed that, as of the end of June 2026, across the whole market, 193 qualified domestic institutional investors (QDII) had cumulatively been approved with QDII quota totaling $176.169 billion. Judging by the additional quotas newly granted to the insurance sector, in the first half of this year, 17 insurance companies in total added $1.32 billion in QDII quota.

In a low interest-rate environment and amid an asset shortage, demand from insurance funds for overseas allocation has continued to heat up. The expansion of QDII quota provides room for insurance funds to optimize global asset allocation and diversify investment risks. However, compared with the surging overseas allocation demand from the insurance industry, the newly added quotas are still just a drop in the bucket. Overall, the industry highly values the precious QDII quota, and it also hopes to broaden the “going overseas” route.

Increase in QDII Quotas

According to data recently disclosed by the State Administration of Foreign Exchange, in the first half of this year, 17 insurance companies in total added $1.32 billion in QDII quota, releasing incremental room for insurance funds to invest overseas.

Although QDII quota has been expanded, compared with the overseas allocation demand of the insurance industry, the additional quotas are still just a drop in the bucket. A Beijing Business Today reporter learned that, for a long time, insurance funds’ overseas investment has been highly dependent on QDII. A set of industry exchange figures shows that in 2023, this model accounted for 58% of insurance companies’ total outbound funds. However, quota approvals and overall volume controls form hard constraints. Even if institutions have mature cross-border investment research and analysis capabilities, they still remain cautious when it comes to global allocation plans.

According to policy requirements, the upper limit for the proportion of overseas investment by insurance funds can reach 15% of total assets. Based on this calculation, the potential scale of overseas allocation that insurance funds can allocate compliantly is enormous. But there is a huge gap between policy benefits and actual implementation, leaving a large amount of long-term capital unable to participate in global market allocation.

Regulators have already identified the pain points and have sent signals of easing. Recently, at the 2026 Lujiazui Forum, Zhu Hexin, Deputy Governor of the People’s Bank of China and Director of the State Administration of Foreign Exchange, explicitly stated that a new batch of QDII quotas will be newly issued and granted.

Beyond QDII, insurance funds are also actively allocating overseas through other channels. Recently, insurance funds’ participation in the bond channel “Southbound Bond Connect” was officially launched, becoming another major channel for insurance funds to go abroad. Insurance asset management companies such as Taikang Asset, Ping An Asset Management, China Life Asset, and Taiping Asset, which are among the first batch of institutions entrusted to carry out “Southbound Bond Connect” business, have already successively completed their first investment transaction(s).

For the two models of insurance funds going overseas, Wang Zhaojiang, Dean of the Beishan Changcheng Fund Investment Research Institute, analyzed for a Beijing Business Today reporter that “Southbound Bond Connect” uses a market-oriented quota-allocation model for total quotas, which can to a certain extent supplement the incremental gap in overseas asset allocation under QDII. However, the two cannot fully replace each other. “Southbound Bond Connect” is limited to Hong Kong bond assets, while QDII can cover diversified assets such as global fixed income, equities, and alternatives. In the future, a complementary pattern may take shape in which “Southbound Bond Connect handles incremental bond allocation, while QDII handles diversified global allocation.”

The Long-Term Risk Control System Should Be Improved

As of the end of the first quarter of 2026, China’s insurance companies had an investment funds balance of about 39.44 trillion yuan, and the scale of bond allocation accounts for nearly half of the total investment proportion of insurance funds. But currently, domestic bond yields have been lingering at low levels; equity markets face intensified cyclical volatility; and the space for real estate investment has been shrinking. On the insurance liability side, rigid costs bring persistent pressure on the spread. Compared with overseas markets, U.S. Treasuries and high-rated offshore U.S. dollar-denominated bonds offer stable coupon income. High-dividend targets in Hong Kong equities and overseas high-quality technology equity assets can optimize the volatility of portfolio returns. Global diversified allocation is one of the paths for insurance funds to hedge risks from a single domestic market and stabilize long-term investment return rates.

Against this backdrop, modestly increasing cross-border diversified allocation and opening up two-way investment channels between domestic and overseas markets have become a core breakthrough for the industry to overcome yield bottlenecks and smooth portfolio volatility. Wang Zhaojiang also said that there is multiple room for expanding overseas investment channels in the future: first, expanding the RQDII RMB outbound channel; second, optimizing restrictions on the proportion of equity investments under Stock Connect; and third, rolling out special cross-border investment facilitation policies for the “Belt and Road.”

It cannot be denied that easing and opening up various cross-border investment channels requires an incremental process of pilot implementation followed by step-by-step expansion, making it difficult to quickly match the industry’s surge-like allocation demand. Therefore, insurance institutions need to take multiple measures to revitalize existing quotas and explore alternative channels. In a related research report, China Life Asset mentioned that insurance companies can plan from a medium- to long-term perspective, reasonably use the counter-cyclical management rules of foreign exchange policies, seize periods when exchange-rate policy loosens to apply for QDII quota, increase the success rate of applications, and prepare for more investment practices in the future. In exploring the substitution effect of domestic asset portfolios for overseas investment, it is recommended to study a “going global advantage” strategy portfolio and explore the feasibility of indirectly allocating overseas equities by investing in companies whose main businesses have a strong correlation with overseas economic cycles.

The overseas market environment is complex and changes frequently, and the rules for cross-border investment differ significantly from those in the domestic market. Insurance funds still face multiple real-world challenges as they go overseas. Wang Zhaojiang said that, at this stage, the key shortcomings are concentrated in: geopolitical country risk assessment; insufficient reserves of global investment research and analysis talent; and inadequate medium- to long-term exchange-rate hedging capability. It is necessary to establish a country-tiered graded-approval mechanism, build a risk-control framework with linkage between domestic and overseas, and improve the long-term risk control system. China Life Asset also said that it would be advisable to determine the main platform for overseas investment reasonably according to medium- and long-term development plans, and build relevant capabilities accordingly. Efforts to explore mechanisms for strengthening the cultivation and evaluation of overseas investment talent should be intensified, so as to gradually accumulate experience in international macroeconomic and capital market investment research and analysis, and build global asset allocation capabilities covering a broader range of assets with stronger strategy differentiation.

Beijing Business Today reporter Li Xiumei

(Editor: Qian Xiaorui)

Keywords: